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Keep to sustain or keep to exploit? Why firms keep hard evidence

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  • Agisilaou, Panayiotis

Abstract

We develop a model wherein collusive firms' decisions to keep or to destroy the hard evidence is endogenous. Unlike previous literature, we assume that the administration of the cartel crucially depends on the existence of the hard evidence. Within this framework, we explore the impact of a leniency program on whether firms' incentives are to destroy or to keep the hard evidence. Moreover, we examine firms' incentives to report or not to report the hard evidence to the antitrust authority. We show that firms may willfully keep the hard evidence, even if a leniency program is not available, in order to enhance the stability of the cartel. Additionally, we prove that firms are more inclined to keep the hard evidence when a leniency program is available. Finally, we demonstrate that firms are more likely to destroy the hard evidence when the collusive profits-fine ratio increases.

Suggested Citation

  • Agisilaou, Panayiotis, 2011. "Keep to sustain or keep to exploit? Why firms keep hard evidence," MPRA Paper 30963, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30963
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    File URL: https://mpra.ub.uni-muenchen.de/30963/2/MPRA_paper_30963.pdf
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    References listed on IDEAS

    as
    1. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-536, August.
    2. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    3. repec:dau:papers:123456789/13637 is not listed on IDEAS
    4. Motchenkova, E., 2004. "Effects of Leniency Programs on Cartel Stability," Discussion Paper 2004-98, Tilburg University, Center for Economic Research.
    5. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    7. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    8. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
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    Cited by:

    1. Blatter, Marc & Emons, Winand & Sticher, Silvio, 2014. "Optimal Leniency Programs when Firms Have Cumulative and Asymmetric Evidence," CEPR Discussion Papers 10106, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    antitrust; cartels; enforcement policy; hard evidence; leniency programs;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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